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I I r r a a n n E E c c o o n n o o m m y y U U p p d d a a t t e e
Issue 133/2016 – Sunday December 11th Iran Air & Boeing signed deal for delivery of 80 aircrafts in ten years
The Iran Air state company confirmed today the signing of a deal with American airplane maker Boeing to buy 80 plans, IRNA quoted Farhad
Parvaresh, the Iranian company’s managing director as saying. The deal was signed in Tehran in front of Iran’s minister of Road & Urban Development Abbas Akhundi. According to Parvaresh, the $16.6 billion deal is on the purchase of 50 Boeing 737s and 30 Boeing 777s that will be delivered in 10 years. The American company’s representative to Iran has said that the deal was signed after obtaining permission from US government.
In a separate development, Maghsood As’adi-Samani, secretary of Iranian airline association told Mehr News today that the model of the airplanes Iran is going to buy from Airbus in a lease-purchase
agreement has been determined but details cannot be revealed as long as all the purchase stages have not been taken. As’adi-Samani also confirmed that Iranian airliners are holding negotiations with Russian Sukhoi to purchase 100 passenger jets. He said
representative of the Russian company is scheduled to have a demo flight this Tuesday before
commencing negotiations with Iranian airliners.
Iranian trade representatives express concern over foreign exchange fluctuations
The December 11th edition of the daily Shargh has focused on the continued upward movement of the unofficial exchange rate in Iran, and interviewed some experts who believe this has fueled
uncertainties on Iran’s markets. The US dollar was traded at 39,250 rial (3,925 toman) on the open market on Saturday evening, indicating a 7-percent depreciation in the rial value in just one month.
Yahya Al-e Eshagh, the former ICCIM president who now chairs the Iran-Iraq Commerce Chamber told the newspaper that such pronounced fluctuations in the foreign currency market have triggered “hazardous and unpredictable” conditions in which behaviors are controlled merely by chance. Al-e Eshagh said such conditions would be the biggest blow to the coutnry’s business decision-makers. According to this official, the incremental depreciation of the rial value would hurt all the economic sectors that are reliant on foreign goods, such as the home appliance, clothing, raw materials, machineries and parts, services, medical industries, tourism and the like. In regards to the raw materials, argues Al-e Eshagh, this would result in increase in cost price and inflict additional costs to both domestic producers and consumers and will further deepen recession and escalate inflation.
Al-e Eshagh cited the “psychological impacts” of the rial depreciation and their negative contribution to the people’s livelihoods as another problem.
“Meanwhile, uncertainties in the foreign exchange market will fuel speculating activities in this market because in ordinary people’s minds, the price of hard currencies will increase over time and hence, they will buy foreign currencies as an asset,” said Al-e Eshagh.
Similarly, Mohammad-Hossein Barkhordar, a former ICCIM member believes that the CBI should have intervened much earlier and never allowed the rial
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although the negative impacts of the rial devaluation would ripple throughout the whole of the economy, the most important effect would be on the
livelihoods of ordinary Iranians because under such circumstances, even the price of those goods that due to the economic downturn were left unsold would surge and in general, the cost price of all goods, even the ones that are not reliant on imports would increase. This would affect the country’s foreign trade. “My argument here is not that the price of foreign exchange should not increase (or get
realized). Rather, I argue that it should not take place under such circumstances because the rial
depreciation in this way would both negatively affect the Iranian livelihoods and the public welfare and cripple the production.”
Mohsen Bahrami, an ICCIM board member similarly argues that the most important effect of the foreign exchange fluctuations in Iran in the instability that it will introduce to the economy, which means
economic actors in all sectors, including the foreign trade, will experience uncertainty. “On the other hand, foreign investors will get hesitated with such fluctuations. This level of uncertainty and hesitation can be extended to the domestic production and to the everyday life of the Iranians.” “The fact is that the key role of foreign exchange in all Iranian economic sectors is clear and evident and this status of wait- and-see and confusion will have a destructive impact on our national economy,” added Mohsen Bahrami.
While some business sector commentators believe that rial depreciation is poisonous for the country’s economy, there are some economists who believe that the rial price is Iran is artificially over-valued, aimed at holding import costs down, and argue that the government needs to take steps to gradually allow the rial to depreciate. The economic daily Donyay-e Eghtesad which is administered by a group of Iranian economists published an article on Sunday titled “the fate of the US dollar” penned by economist Dr. Pooya Nazeran. In the concluding section of this
article, the author argues that “Today, we are left with just two options. One is a short-term
maintaining the dollar/rial rate at below 40,000 rials, the result of which would be deteriorating economic recession and wavering banking system which will eventually end up with expecting the US dollar price to work its way above 50,000 rials. The second option is to commence a managed increase in the price of US dollar so as by the March 2017, it reaches 50,000 rials gradually and with a gentle slope.”
NIOC holds tender for Azadegan field in 1st half of 2017
An Iranian Petroleum Ministry official said several foreign companies including Royal Dutch Shell, Total of France, Inpex of Japan along with a number of European and Asian companies have shown interest to develop the Iranian giant Azadegan oil field, Mehr News Agency reported on Sunday. Noureddin
Shahnazi-Zadeh, managing director of NIOC-affiliated Petroleum Engineering & Development Company (PEDEC) said that after signing an agreement, Shell has been given a 4-6 month time to study
development of the field, and Total and Inpex are supposed to submit the results of its technical studies for developing and increasing recovery rate of this shared field in the next coming days. After receiving the results of their studies, we will decide on holding tender for developing the field that will presumable be in the first half of 2017, said Shahnazi-Zadeh. He said all foreign companies are obliged to partner with a local company for developing Iranian energy fields.
He didn’t decline the possibility of formation of a consortium comprising the French, British and
Japanese companies but said that for sure, an Iranian company should be included in this consortium.
President-elect Trump’s likely to pick Exxon Mobile CEO as Secretary of State
It has been widely speculated that US President-elect Trump is going to name Rex Tillerson, 64-year-old veteran oil executive and CEO of Exxon Mobile as his secretary of state. Tillerson does not have formal political experience but is well-recognized as a
3 business owner. It might be interesting to foreign
businesses to know what Tillerson’s view in regards to the JCPOA with Iran is. Some commentators see him as a pragmatic figure who wants to do business with Iran. On March 3 2015, CNBC news website had published excerpts from an exclusive interview with Tillerson. See the excerpt here:
Tillerson who according to the Financial Times, ran the company’s operations in Russia in the late 1990s, has opposed sanctions against Russia and in an address to shareholders at Exxon’s annual meeting in September 2014 said “We do not support sanctions, generally, because we don’t find them to be effective unless they are very well implemented.”
After OPEC agreement, non-OPEC members agreed cut oil output to boost prices
After more than two years of low prices, OPEC and non-OPEC oil producers reached a deal on Saturday to curtail output to boost prices. According to Reuters, on Saturday, producers from outside the OPEC including Russia agreed to reduce output by 558,000 bpd. The decision was made less than two weeks after OPEC members in their ordinary meeting in Vienna decided to slash output by 1.2 million barrels per day from Jan 1.
Reuters however reminds that since OPEC (and non- OPEC] has a long history of cheating on output quotas, the market’s focus will hereafter be on compliance of the members to the agreement. After
the meeting, Saudi Arabian Energy Minister Khalid al- Falih told reporters in a press conference that "This historic agreement cements and prepares us for long- term cooperation." Russian Energy Minister
Alexander Novak told the same news conference that the deal “will speed up the oil market stabilization, reduce volatility, and attract new investments."
2nd Iran Mines Mining Industries Summit in Tehran (Dec 10-11)
The deputy minister of Industry, Mine & Trade and head of the Iranian Mines & Mineral Industries Development & Renovation Organization (IMIDRO) said that banking and financial relations with various countries have been improved thanks to the efforts of the CBI and MOFA officials, and added that the presence of 117 individuals from renowned foreign mining companies indicates facilitation of our relations with the world, Mehr News Agency wrote today. Mehdi Karbasian who was speaking to the 2nd Iran Mines Mining Industries Summit in Tehran (Dec 10-11) said Iran’s economy has reached a state of stability as opposed to the second half of the last decade during which the country’s credit risk had significantly deteriorated and inflicted heavy economic and non-economic costs to the country’s mine and mineral industry. He said the tender announcements for some projects including the one on the Parsian special zone have been welcomed by foreign companies. He explained that establishing mineral industries in southern Iranian coasts especially in the Parsian, Lamerd, and Persian Gulf special zones as well as in Chabahar free zone are of high priority for Iran because they don’t face water, natural gas and transport problems and have access to the world markets. “Our purpose is to increase steel production to 55 million tons, cathode copper to 1.5 million tons and aluminum to 1.5 million tons. It is expected that a great portion of the government’s plans in job creation and GDP growth is realized through investment in the country’s mines and mineral sectors,” added Karbasian.
